Implication of IFRS Adoption on Accounting Quality: Evidence from Australia

This report discusses the implications of IFRS adoption on accounting quality in Australia based on the AASB Research Report No. 3. It covers the effects on investors, accounting quality, readability of financial information, earnings management, and value relevance of earnings and equity.

IFRS-REPORTING ADOPTION
IMPLICATION TO ACCOUNTING
By (Student’s Name)
Professor’s Name
College
Course
Date

Outcome Summary
• This report is based on the paper AASB Research Report
No. 3: “the effects of IFRS adoption in Australia: Evidence
from academic research” published in October 2016.
• The main of the AASB Research Center is to give thought
leadership on the reporting issues.
• The paper resulted from the need to help AASB and
Financial Council (FRC) to assess the IFRS adoption in
Australia in 2005.

Implication of IFRS Adoption
• The key finding from this survey and analysis based on the
present evidence relating to the IFRS adoption effects
include: Adopting IFRS by the firms in Australia seems to
have had positive results for investors alongside analyst
on study on disclosing enhanced analysts following, and
forecast accuracy.

Implication of IFRS Adoption
Cont.
• In respect of accounting quality, it is noted that some studies
have reported positive results from the shift to goodwill
impairment while other studies have shown that alterations to
the internally generated intangible assets’ treatment have
decreased the Australia financial report quality.
• The shift to goodwill impairment seems to have additional
aftermath provided the obvious rise in the portion of purchase
price which companies currently allocate to goodwill,
compared to additional assets

Implication of IFRS Adoption
Cont.
• In regards to readability of financial information, there has been a
suggestion that the IFRS use has seen longer and longer reports with ease
of reading.
• These outcome relating to the IFRS influence on the Australian financial
reporting quality and practices parallels the conclusion hit by a wider
literature scrutiny of the previous empirical study which has consider the
IFRS-accounting quality internationally (Bryce, Ali and Mather 2015).
• The review of the literature has further attributed the mixed outcomes to
issues of sampling and the utilization of the diverse quality measures.

Implication of IFRS Adoption
Cont.
• In respect of earnings management, the survey also reviewed the
impact of IFRS on earnings management and noted that it has
decreased the quantity of firms involving in earnings management.
• The overall result indicated that distribution of income assessment
results reported by 422 firms in Australia showed that earnings
management under the IFRS stood aligned with the AGAAP.
• Also, the earnings management, timely loss recognition and value
relevance have been assessed in this review.

Implication of IFRS Adoption
Cont.
• In respect of the value relevance of earnings and equity, Chalmer et al.
(2011) probed the impact of IFRS adoption on equity and earnings’
value relevance for the ASX listed companies over a timeframe between
1990 and 2008.
• Specifically, the focus was on the ability of the book value of equity and
the earnings reported (NI) to capture info which impact the prices of
share.
• The outcome was that the value relevance of the equity of the
shareholder stood consistent crossways the pre-IFRS and the
transitions as well as the IFRS era.

Relationship of Topics
• From this survey report, I have been able to shown the
relationship between my chosen topic and the international
accounting topic of IFRS adoption from my accounting theory and
current issues Subject. As has been seen from the discussion.
• This work has shown the impacts of IFRS on the quality of
accounting information. It has been highlighted that it.
• The outcomes of this survey has shown that a IFRS need to be
integrated into the Australian Reporting Framework due to its
advantages.

References
• Apergis, N., 2015. The role of IFRS in financial reporting quality: Evidence from a panel of MENA countries. International Journal
of Economics and Finance, 7(10), 182.
• Benson, K., Clarkson, P. M., Smith, T. and Tutticci, I., 2015. A review of accounting research in the Asia Pacific region. Australian
Journal of Management, 40(1), 36-88.
• Bond, D., Govendir, B. and Wells, P., 2016. An evaluation of asset impairments by Australian firms and whether they were
impacted by AASB 136. Accounting & Finance, 56(1), 259-288.
• Bryce, M., Ali, M. J. and Mather, P. R., 2015. Accounting quality in the pre-/post-IFRS adoption periods and the impact on audit
committee effectiveness—Evidence from Australia. Pacific-Basin Finance Journal, 35, 163-181.
• Bugeja, M. and Loyeung, A., 2015. What drives the allocation of the purchase price to goodwill?. Journal of Contemporary
Accounting & Economics, 11(3), pp.245-261.
• Bugeja, M. and Loyeung, A., 2017. Accounting for business combinations and takeover premiums: Pre-and post-IFRS. Australian
Journal of Management, 42(2), 183-204.
• Bugeja, M., Czernkowski, R. and Moran, D., 2015. The impact of the management approach on segment reporting. Journal of
Business Finance & Accounting, 42(3-4), 310-366.
• Firth, M. and Gounopoulos, D., 2017. IFRS adoption and management earnings forecasts of Australian IPOs.
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